10 typical mistakes buyers of foreign real estate make
Acquisition of foreign real estate is a difficult venture, which to a large extent is almost like acting blindly.
Acquisition of foreign real estate is a difficult venture, which to a large extent is almost like acting blindly. The buyer should take this process very seriously because any mistake in this matter can be very expensive. Those who are acquiring real estate abroad for the first time inevitably encounter difficulties. These difficulties are related to the search of real estate, selection of an agent, and completing the contract. The main problem is associated with the distance of the acquired real estate.
Restricted abilities to examine the acquisition carefully, as well as lack of awareness of current offers available on the market, and the local conditions of acquisition of real estate in a particular region, create a stressful environment, resulting in purchasers taking the wrong options. Usually the buyer is rarely familiar with all the advantages and disadvantages of an acquisition and has to rely on the agent to a considerable extent.
However, selection of a reliable agent does not guarantee that the buyer will be fully satisfied with the transaction. It is necessary to take into consideration a whole range of factors that accompany the acquisition process at all stages in order to acquire real estate that will meet all the requirements of the customer.
Lack of understanding of the objective of the acquisition
Before searching for real estate, many buyers do not clearly define their reason why they are acquiring the real estate. They may be thinking about purchasing resort real estate, real estate for permanent residence in another country, student real estate for the education of their children, or real estate for subsequent lease.
Obviously, each case needs a specific approach. However, buyers often wish to combine different goals for acquiring real estate in order to minimize the risks, or simply just to save funds. A combination of different objectives is often impossible due to the fact that in some cases they mutually exclude each another. For example, a buyer is looking for resort real estate on the coast of a popular country but would like this real estate to be located as far away as possible from the tourist areas. The same buyer is also hoping to obtain a high income from real estate lease. It is understandable that a quiet place does not guarantee a high demand among the lessees.
When choosing real estate for investment, its liquidity is an important factor. When choosing a property for permanent residence, it is necessary to take into consideration its location, if the buyer is going to work or to establish their own business in this country.
Distrust of the agent
Many Russians employ several agents when acquiring real estate overseas and the number of agents can be up to ten. This is wrong, both in terms of achieving the objective, and in terms of establishing a trust-based relationship with the agent. Usually, when a potential buyer does not establish a serious business relationship with the agents, and often does not even remember their names, it’s not worth hoping that the agents, in turn, will devote enough time to search for the most suitable offer. The acquisition should be mutually beneficial, based on the confidence in the final result by each of the parties. The optimum number of agents for cooperation should not be more than two.
Selection of an agent based on personal qualities, rather than on professional qualities
Customers are often guided by personal qualities, rather than by professional qualities when using the services of the agents. Numerous cases of unfair work of the agents show that it is not necessary to cross the line and establish a personal relationship. Such agents managed to convince the buyers to acquire real estate without checking their legal status.
When the buyer receives various proposals from the agent, he needs to obtain a clear explanation of whether the real estate is suitable and whether it is suitable for his purposes. It is better to avoid unrealistic promises of the agents about the presence of any type of real estate in a particular region. As a rule, honest agents listen to the requirements of the buyer and only offer available real estate or recommended buying something in another region.
False confidence in the seller when acquiring real estate without an agent
There is a great risk of being cheated when acquiring real estate in foreign countries, especially when acquiring real estate directly from the owner without any agent. Doing this requires the honesty and respectability of the seller, but often the buyer does not have this knowledge.
Neglecting to read the agreement
Buyers often do not pay enough attention to less obvious additional costs by reading the purchase agreement. The most common type of such costs involves real estate maintenance. For example, a real estate maintenance fee in European countries can reach EUR 3000-4000 per year. This usually includes payment for all kinds of repair work, concierge services, cleaning, and garden care (for a private house).
By acquiring real estate which includes the costs of hidden services, the buyer runs the risk of bearing significant additional costs. In particular, pool maintenance can cost up to EUR 150 per month.
Real estate acquisition without preliminary examination
It is not worth relying on the real estate photographs. Quite often, when acquiring real estate remotely, people are very disappointed to see the real estate with their own eyes. Large and respectable real estate agencies always offer familiarization tours, which are often free. It is possible to examine several properties before making a final decision.
Granting of power of attorney to inacquainted persons
It is necessary to be very cautious when granting power of attorney for the sale to third parties. There have been cases when buyers have granted the power of attorney to realtors who they do not really know, who registered the acquisition and subsequent sale of a new apartment on their behalf.
Insuficient attention to the construction time of unfinished projects
It is important when acquiring a new property to check the completion time for its construction. Sometime buyers overlook this and are left waiting a long time until they can move into their new home. In addition to inspecting a new home, buyers can protect themselves from such situations by closely examining the documents. For example, in Bulgaria, the commissioning of a property is confirmed by the so-called “Act 16”. If the real estate item has such a document it means that there were no problems with its completion and it is possible to move into the house.
Acquisition of real estate in the secondary market by instalments
Some buyers acquire real estate abroad in the secondary market by paying in instalments. However, this exposes them to greater risks because, by acquiring secondary housing the registration of property rights is only possible after completion of payment. If the owner suddenly decides for some reason to change his plans for the real estate item, the law does not protect the buyer. When acquiring secondary housing, it is not possible to pay by instalments, the invoice should be paid immediately and the property rights should be executed immediately.
Unrealistic assessment of the opportunities provided when acquiring a property
Acquisition of a property often promises additional benefits that strongly attract potential buyers. This can be rental income, profitable investments in advancing markets, as well as the possibility of acquiring a residence permit in the EU and the Schengen area.
However, many buyers who do not receive accurate information from the specialists unwittingly accept any information that describes the benefits of real estate acquisition in a particular country or region and ignore the disadvantages. This is most often connected with obtaining residence permit and the use of other benefits when buying real estate in Europe.
Often, on acquiring the property, the buyer recognizes that he needs to take a number of further actions and investments, as well as to spend some additional time to achieve an objective, which initially seemed so easy (eg. acquiring a residence permit). To avoid any surprises the buyer should discuss with the specialist in advance all the pros and cons of the additional opportunities that attracted him when selecting a real estate item. With closer examination the benefits may not be so attractive and the buyer may refuse the proposal.
The editors of the portal express their gratitude to Oleg Cherenchukin (“Premium Property”), Julia Smagina (Albatross) and Nadezhda Princ (Prinz-Dom) for their help in preparing this material.